Huge investment planned in new LNG supply projects: Wood Mackenzie video series
New LNG supply needs to be developed… fast. But which projects are best placed to proceed? There's a lot of competition out there as the number of proposed projects outweighs demand. Our research looks at the key milestones each project must pass in order to reach FID.
This short video from
Giles Farrer, Research Director, Global Gas and LNG Supply, looks at those milestones and how many projects have taken FID so far this year.
https://gastechinsights.com/article/huge-investment-planned-in-new-lng-supply-projects
A new era of the European gas market: Surviving under stronger competition
The European gas industry is fast entering a new era alongside global gas markets as the world shifts towards a decarbonised economy.
In this tough environment that might discourage long-term investments, and where the natural gas industry has yet to find its role within the energy mix, we are witnessing a market that is increasingly more volatile. This creates a climate where traders can thrive as we see a strategic switch towards vertical integration including gas equity, liquefaction and regasification projects, capacity off-takes and long-term supply contracts. This shift is also leading progressively to the Henry Hub as a main price driver in the European gas market.
If we look at Europe, we see a market that is gradually converging towards a ‘single price’ market with TTF as the benchmark. Both the Gas Target Model and Network Codes aim to promote a single European market to enhance stronger competition and supply security. Yet Europe appears to be split into two main market areas: in north-west Europe, we see clear gas indexation, while in the Mediterranean area retail prices remain partially indexed to the price of Brent crude. So, in the case of Spain, Brent is regarded as the main price benchmark for gas contracts. But the reality is that this is no longer the case since the main price driver in most retailing offers is now the TTF forward curve.
In this evolving market, gas shippers must assure they properly assess their risk profile and design manageable risk bands in order to stay competitive. It is also essential that gas shippers aim to have a well-balanced and diversified supply portfolio. A key is to successfully combine contracts of different durations: short, medium and long-term, together with spot contracts for balancing optimisation and short-term arbitrage opportunities. A diversified portfolio must also be well distributed between piped natural gas and LNG and cover a wide range of pricing from Henry Hub, Brent to TTFN.
Above all the key factor to remain competitive in this new era marked by high volatility is flexibility.
The shift in the markets is also bringing with it a growing weight of new markets for natural gas, as is the case for Small Scale LNG. This provides new opportunities within Europe including LNG transportation for heavy goods vehicles and for ships through tailor-made offers adapted to every customer’s needs. This would include long-term retail contracts with a diesel or LSFO indexation. Proactive risk management will be required for this to be successfully implemented.
And really there is no alternative but to progress on the path we are on: Europe is moving towards a low carbon economy and will do so with or without us. The natural gas industry must work very intensively to achieve further cost reductions on technologies to produce renewable natural gas, and in turn benefit from a circular economy.
It is apparent that development and progress is still needed and those companies who wish to be among the most competitive should progressively integrate the renewable natural gas triangle into their portfolios. This would include bio-methane, Power to Gas and Carbon Capture & Storage.
https://gastechinsights.com/article...s-market-surviving-under-stronger-competition
The last 18 months have been transformational for the LNG industry. After years of concern about oversupply, improved market dynamics mean that this fear has reduced. What has caused this change? The massive coal to gas switching program in China has certainly played a large part in this changing landscape.
In this short video looking at the global gas market,
Massimo Di-Odoardo, Vice President, Global Gas and LNG Research, explains why China is set to become the world's largest LNG importer. He also looks at why Europe will also need to become a major importer.
https://gastechinsights.com/article/global-lng-supply-gap-from-2022
Report summary
Europe's reliance on imports has continued to rise, with the region importing more than 75 bcm than just two years earlier. With a tighter market, prices have responded, topping traditional oil-indexed levels. And as demand remains resilient and indigenous production continues to fall, we estimate Europe will need to import an additional 85 bcm by 2025 compared to 2017. Between 2015 and 2017, 60% of the increased imports came from Russia; there is additional market space in Europe for further Russian increases as well as incremental rises in LNG supply. Post-2025, we see scope for new regas capacity in Europe, with LNG accounting for a quarter of the European market, up from 12% in 2017.
www.woodmac.com/reports/gas-markets-europe-gas-imports-and-contracts-long-term-outlook-h1-2018-57701234
Adopting a central LNG marketplace: A key solution for the industry
What will it take to have a liquid market for LNG, and why is it important?
Currently, LNG could be described as a market without a marketplace. There is an increasing amount of supply, demand, and spot transactions, however, the market activity takes place in numerous disconnected venues. Direct bilateral communications, sealed-bid tender processes, and to a lesser extent third-party consultants/brokers each have activity in the space. For liquidity to develop, market activity needs to be consolidated in fewer venues.
Perhaps the biggest challenge to overcome in the LNG market is the lack of transparency. Market participants struggle to determine price, and there is an imbalance of information that tends to favour the larger, integrated traders. The lack of transparency is also problematic in the indexation of LNG markets since a growing futures market is creating more incentive to drive spot prices.
A solution that tackles these problems is the adoption of a central marketplace for LNG trade.
LNG has the potential to be the global energy benchmark of the future, driving the decision-making for investment in the entire energy complex. To get there the structural deficiencies that hinder liquidity in the market need to be addressed. The most efficient way to address these is for an independent, neutral central marketplace to build the cornerstones required for market liquidity to thrive.
https://gastechinsights.com/article...g-marketplace-a-key-solution-for-the-industry